Among shopping center REITs, big-box powers centers proved most worrisome through the downturn as demand dwindled and vacancies increased, but because the next wave of store closures never materialized, opportunities developed in the space, Analyst Nathan Isbee of Stifel Nicolaus says.
“If you are looking at one area of growth in the shopping center space, it is those more box-focused REITs, where rents — which, just 18 to 24 months ago were negative 15% to 20%, because you’ve had so much of that vacant space re-leased already — those rents have, in some cases, turned positive,” Isbee said. “We would expect that to continue to improve.”
Isbee’s top picks in the shopping center space include Kimco Realty (KIM), for its recent acquisition activity and removal of non-retail assets; Equity One (EQY), which is upgrading its portfolio; and Ramco-Gershenson (RPT) in the small-cap space.
“[Ramco-Gershenson] is a REIT that has a high-quality portfolio. It’s challenged, given the perception that its 40% exposure to Michigan, as well as a high exposure to Florida is a negative,” Isbee said. “But if you take the time to go out and visit the properties, you realize they have a pretty solid portfolio.”
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